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The Supreme Court of India has delivered a significant judgment on the interplay between the Income Tax Act, 1961, the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), and the Finance Act 2021, particularly in relation to reassessment notices. The Court's decision clarifies the application of TOLA, the extended time limits it provides, and the validity of reassessment notices issued under both the old and new regimes.
The Court's judgment arose from appeals concerning reassessment notices issued between July and September 2022, focusing on the interplay of the three legislations. The primary issues revolved around whether TOLA applies to reassessment notices issued after April 1, 2021, and the validity of reassessment notices issued under the new regime during the specified period. The Court provided clear guidelines, determining that TOLA overrides Section 149 of the Income Tax Act solely to the extent of extending time limits for issuing reassessment notices under Section 148.
The Court's analysis emphasizes the importance of reading the Income Tax Act in conjunction with the substituted provisions introduced by the Finance Act 2021. Notably, TOLA's application extends to actions or proceedings specified under the substituted provisions of the Income Tax Act that fall for completion between March 20, 2020, and March 31, 2021. The Court further elaborates on the specific criteria for determining the application of TOLA to Section 151 of both the old and new regimes. Furthermore, the Court extends the scope of the Ashish Agarwal (supra) ruling, which deemed reassessment notices issued under the old regime as show cause notices under the new regime, to all notices issued between April 1, 2021, and June 30, 2021.
The Court's judgment underscores the significance of balancing the interests of the Revenue and assesses in tax matters. The Court meticulously examines the legislative intent behind the Income Tax Act and TOLA, highlighting their separate and distinct purposes. The judgment reaffirms the principle of strict interpretation of taxing statutes, ensuring that any imposition of tax is based on clear legislative intent. The Court's interpretation of TOLA acknowledges its role in providing time-bound relief during the COVID-19 pandemic, while ensuring its harmonization with the Income Tax Act.